WTI Crude Caps Worst Month in Two Years on Refinery Shutdown

July 31 (Bloomberg) -- West Texas Intermediate crude fell to a four-month low amid global declines in stocks and commodities and after CVR Refining LP said a Kansas refinery will be shut longer than expected, reducing oil demand.

The seventh decline in eight days capped a monthly loss of 6.8 percent, the biggest in two years. CVR’s plant in Coffeyville may be shut for four weeks after a July 29 fire, Chief Executive Officer Jack Lipinski said today on an earnings call. The plant uses crude from Cushing, Oklahoma, the delivery point for WTI futures. The Bloomberg Commodity Index slid to a five-month low and the Standard & Poor’s 500 Index headed for the first monthly drop since January.

“Coffeyville is bringing the market down,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “You are going to be using less crude from Cushing. There is also broad concern about global stock markets.”

WTI for September delivery decreased $2.10, or 2.1 percent, to $98.17 a barrel on the New York Mercantile Exchange, the lowest settlement since March 17. The volume of all futures traded was about 35 percent above the 100-day average. Prices were down 6.8 percent in July, the most since May 2012. The premium of September contracts over October slumped to 85 cents from $1.23 yesterday.

Brent for September settlement slipped 49 cents, or 0.5 percent, to $106.02 a barrel on the London-based ICE Futures Europe exchange. Volume was 13 percent above the 100-day average. The European benchmark crude was at a premium of $7.85 to WTI on ICE, the biggest since June 24.

Control System

The fire at the 115,000-barrel-a-day Coffeyville refinery damaged fiber optics in the control system, forcing valve closings on units and preventing crews from operating equipment, according to a person familiar with operations.

CVR, which owns 1 million barrels of storage at Cushing and leases 3 million barrels of tanks, says Cushing supplies go to Coffeyville and the Wynnewood refinery in Oklahoma.

Inventories at Cushing started declining in January after the southern leg of TransCanada Corp.’s Keystone XL pipeline began moving oil from the hub to Gulf refineries. Supplies dropped to 17.9 million barrels in the week ended July 25, the lowest level since 2008, according to the Energy Information Administration.

“Coffeyville is connected directly to Cushing, and that’s why it’s a big deal,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “We are probably going to see a build at Cushing.”

Argentina Debt

WTI also slipped with other commodities and equities as Argentina missed a payment on $13 billion of its debt. The Bloomberg Commodity Index of 22 raw materials fell to 127.88, the lowest level since February. The S&P 500 declined as much as 2 percent today, down 1.4 percent for the month.

Argentina missed a deadline yesterday to pay $539 million in interest after two days of negotiations in New York failed to produce a settlement with Elliott Management Corp. and other hedge funds that won a court order for full repayment on the securities they own. The ruling prevents Argentina from servicing its debt until the holdouts settle or are paid the $1.5 billion judgment.

“We have the Argentina debt crisis and we have Coffeyville,” Larry said. “Everything is piling on.”